KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) anticipates potential operational disruptions in the near term until there is more clarity or a clear resolution between Petroleum Sarawak Berhad (Petros) and Petronas.
This comes after news that Petros will take over the trading activities of natural gas produced in the state from Petronas, with the transition starting in the second half of this year.
RHB Research noted that there has been increasing talk about potential capital expenditure (capex) cuts by Petronas since the announcement.
Petronas has previously been guided to spend RM300 billion in capex between 2023 and 2027, which is RM50 billion per year, including a domestic average capex spending of about RM22.6 billion per annum, which is a five-year capex of RM113 billion.
"The earnings impact on Petronas remains uncertain but may affect its ability to spend, notwithstanding that it has committed to paying a sizeable dividend to the federal government.
"While we may see some potential operational disruption in the near term, we still assume a resolution to be achieved between these two involved parties without jeopardising existing productions and future domestic investments to capture the rising global gas demand," it said in a research note today.
As it maintained its "overweight" stance on the regional oil and gas sector, the research firm continues to favour counters with upstream exposure and international diversification amidst flagging higher uncertainties between Petronas and Petros in Malaysia.
"For now, we prefer upstream service players with greater exposure in the maintenance-related space, as they provide greater earnings resilience coupled with corporations with international diversification," it said.
According to RHB Research, the third quarter of 2024 (3Q 2024) is likely to be the strongest quarter, with activities ramping up and a new maintenance contract cycle round expected to be rolled out by the end of this year.
Meanwhile, the offshore support vessel (OSV) market is expected to be rosy, as there are still potential improvements in daily charter rates due to tight vessel supply.
The firm said long-term contract tenders have been submitted by various OSV players, and these contract renewals are expected to be awarded in the near term.
The firm's top picks are Dayang Enterprise Holdings Bhd with its target price of RM3.58 and Dialog Group Bhd with its target price of RM2.96.
On Brent crude oil price, RHB Research said it maintains the forecasts for 2024, 2025, and 2026 at US$88, US$83, and US$80 per barrel.
It stated that the forecasts are premised on an optimistic outlook for the global economy in 3Q 2024, driven by continued economic recovery momentum in key markets such as the US, China, and selected Asean economies.